CEO Pay Reaches All-Time High as Workers’ Wages Stagnate

by Madeleine Baran

Despite widespread public and investor outrage over extravagant CEO compensation packages, top executives saw their earnings skyrocket last year.

Raises for CEOs at the nation’s largest companies more than doubled in 2003, according to a new study conducted by The Corporate Library (TCL), a private company that analyzes corporations for investors. The median rate for CEOs at the nation’s 500 largest publicly-held companies increased by 22 percent, compared with a nine percent increase in 2002. The increase for the 1,794 largest companies was slightly less, at 15 percent.

In comparison, the average worker will receive a 3.3 to 3.5 percent pay increase this year, according to estimates by Mercer Human Resource Consulting, a private research and consultation firm. Pay increases for most workers are at the slowest rate since at least the mid-1970s. Inflation and mounting health care costs are expected to off-set these already small raises.

The average compensation for CEOs who held their jobs for all of 2003 was $1.85 million. Interactive Corps CEO Barry Diller topped the list, with a salary of $156 million, including $151 million in profit from stock options. Four top companies, Apple Computer, Oracle, Yahoo and Colgate-Palmolive, increased their CEO pay by more than 1,000 percent.

CEO pay has increased rapidly in the past decade. From 1989 to 1999, the real median wages of CEOs went up by 62.7 percent, or the equivalence of 107 times an average worker’s salary, according to the Economic Policy Institute (EPI), a think tank that seeks to include the needs of low and middle-income people in policy debates.

The ratio of CEO compensation to that of the average US worker is the highest in recorded history. While top CEOs earn millions each year, the median salary for all full-time, full-year workers in the US is $33,000, according to the latest available US Census data from 1999. The Miami Herald reports that about 24 percent of workers earn less than $9 an hour, which marks the federal poverty line for a family of four.

"It might have been thought that, after three years, the almost constant criticism of excessive CEO pay levels would have started to have an effect," Paul Hodgson, the report’s author, told the Financial Times. "But, despite a few scattered instances, 2003 is business as usual."

Stock options and other awards accounted for the majority of the increase, but almost all other areas of compensation, including base salary and annual bonuses, also increased.

Other industry estimates of executive compensation have been lower, showing an average increase of 9.1 to 16.4 percent, the Financial Times reports. However, many of these studies failed to incorporate the cash value of share options, a major source of CEO wealth.

"[The study] shows that even after three not particularly good years, people can make enormous amounts from stock options," Hodgson told the Financial Times.

Last year, as the stock market began to recover, many executives cashed in their options, while also receiving increasing cash and stock incentives, driving total compensation levels to a record high.

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